Contractor among first five firms to confirm they will challenge cover-pricing penalties

Kier has lodged an appeal against its £18m fine by the Office of Fair Trading, labelling it “excessive and discriminatory”.

According to papers filed at the Competition Appeal Tribunal, Kier is seeking to reduce the figure because it did not receive leniency for admitting the charge and the fine did not take its relatively low profit margin into account.

Kier, which is one of five firms to confirm this week they will lodge appeals, received the heaviest penalty among the 103 contractors fined £129.5m by the OFT as part of its inquiry into cover pricing and bid rigging. The average fine was £1.13m.

Kier’s appeal document said: “The OFT must have regard to Kier’s profits as a cross-check to determine the actual financial impact of the fine on the company.”

In the year to 30 June 2009, after writedowns Kier made a pre-tax profit of £25m on turnover of £2.1bn – producing a margin of 1.16%.

Among the others to appeal are £1.4bn-turnover Dutch construction and engineering services company Ballast Nedam (fine: £8.3m) and social housing specialist Apollo Group (£2.2m).

Dave Sheridan, chief executive of Apollo, said his firm would appeal the fine but not the OFT’s decision. He said: “While we remain confident we have not infringed competition law in any way, appealing the OFT’s decision on substance would be costly and prone to failure, since the legal system surrounding the case leans towards finding companies guilty until proven innocent.”

Yorkshire-based Quarmby Construction (£882,000) will also appeal. One other major contractor, which wished to remain nameless, is set to go public with an appeal next week and many others could follow.

Of the other major contractors fined by the OFT, Balfour Beatty and Interserve will not appeal.

It is understood the latter did not think the legal expense merited pursuing the case. Willmott Dixon and Galliford Try declined to comment, while David Chambers, chair of £87m-turnover Lindum Group, said: “I don’t think there is any hope the appeal would be fair. We can’t fight a war against such a powerful goliath.”

According to an OFT spokesperson, the tribunal has the power to reduce or increase fines once an appeal is heard. But one legal source said an increase in the fines was “highly unlikely”, given the already weak state of the industry.

What happens next

Legal experts say the tribunal is expecting between 15 and 20 firms from the 103 to launch an appeal, which has to be done by 5pm next Monday. The next stage will be case management conferences, which will begin in January or February next year. All sides discuss the key issues and similar cases may be lumped together to save time. Written statements will be followed by the hearing and the whole process could take eight months. Lawyers say the key issue will be one of equal treatment. “It will be quite boring and technical to the outside world,” said one lawyer this week.

Councils keep ‘foul play’ deterrent

Yorkshire and Humberside councils are to retain clauses in their framework contracts that could let them terminate deals with firms found guilty of bid rigging by the Office of Fair Trading.

Deals with builders on the £1.2bn four-year YORbuild framework included the clauses in anticipation of the OFT’s judgment. It is understood that following the OFT’s appeal to local authorities not to blacklist contractors, a number of firms that have judgments against them, including Willmott Dixon, will remain on the framework.

However, a source close to the matter said the YORbuild consortium had decided to keep the option of terminating deals in case there is “foul play in the future”.

The news comes as YORbuild councils prepare to announce which firms [apart from Willmott?] are on the framework. It is understood that BAM and Wates have been listed on all sections.

n Leeds council has provided further details on its compensation claims from contractors found guilty by the OFT. Andrew Carter, the council’s executive board member for development, said: “38 contractors named by the OFT have a history of working with the council. We have written to all asking them to confirm or deny their involvement in price-fixing, and what compensation they will offer if this is the case.”

He added: “Just last year, the council set out how it would combat such issues – including warning contractors against distorting competition, and investigating contractors' full tendering history with the council to identify unusual bidding patterns. The door remains open for any potential legal action against firms found guilty of price-fixing.”